1. What is Profit on Cost?

Profit on Cost is a fundamental business metric that shows the difference between the selling price and the cost price of an item or service. It represents the actual monetary gain made on each sale.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• Selling Price — The price at which the item is sold to the customer
• Cost Price — The original price paid to acquire or produce the item

Explanation: This straightforward calculation shows the absolute profit amount before considering other expenses like overheads or taxes.

3. Importance of Profit Calculation

Details: Calculating profit on cost is essential for businesses to understand their pricing strategy, determine product viability, and make informed financial decisions.

4. Using the Calculator

Tips: Enter both selling price and cost price in dollars. Both values must be positive numbers. The calculator will show the difference between them.

5. Frequently Asked Questions (FAQ)

Q1: Is profit on cost the same as profit margin?
A: No, profit margin is typically expressed as a percentage of the selling price, while profit on cost is the absolute dollar amount difference.

Q2: What if my cost price is higher than selling price?
A: The result will be negative, indicating a loss rather than a profit on that transaction.

Q3: Should I include all expenses in cost price?
A: For accurate profit calculation, cost price should include all direct costs associated with acquiring or producing the item.

Q4: How often should I calculate profit on cost?
A: Regular calculation (per product, per batch, or per time period) helps maintain healthy business finances.

Q5: Can this be used for service businesses?
A: Yes, where "cost price" would represent the cost to deliver the service (labor, materials, etc.).